Groceries are arranged for a photograph. (Photographer: David Williams/Bloomberg)

Amazon Brings Back Largest Seller, Grocery Arm After ‘Complying’ With Tougher Rules

Days after Amazon India removed its largest seller Cloudtail and suspended sales of its grocery arm Pantry to comply with newly imposed restrictions, the two services are back.

Cloudtail returned after Amazon Asia sold its 25 percent stake in Prione Business Services, Cloudtail’s parent, to Infosys Ltd.’s co-founder NR Narayana Murthy’s Catamaran Ventures, a person privy to the development said. The Seattle-based giant now owns 24 percent and Catamaran Ventures holds 76, the person said requesting anonymity as he is not authorised to speak to the media.

“We have to be 100 percent legal and complaint,” Murthy told BloombergQuint. Cloudtail had stopped selling on Amazon from Feb. 1 to be fully compliant, and by Feb. 5, they were compliant, he said.

The Narendra Modi government, under pressure from small retailers, tightened foreign direct investment rules for e-commerce, barring Amazon and Walmart Inc from owning stake in online merchants selling on their platforms. The new rules also clamped down on exclusive tie-ups, deep discounts and selling private labels. Thousands of products vanished from Flipkart and Amazon—which account for 70 percent of India’s online retail market—including those sold by Prione-owned Cloudtail.

With this restructuring, Prione is no longer a group company to Amazon as per the definition of group companies in foreign direct investment policy, Atul Pandey, partner at Khaitan & Co., said over the phone. The online retailer is no longer in position to have control on Prione and can continue to use Cloudtail as a seller, he said.

Appario, the other large seller on Amazon, is also expected to undergo similar ownership restructuring, and will return to sell on, the person quoted earlier added.

Meanwhile, Catamaran Ventures said in a statement “we regret the inconvenience caused to our suppliers and customers due to the stoppage of the operations of Cloudtail” between Feb. 1 and 6.

Also read: E-Commerce FDI Policy: Bored Game

Pantry Is back

Amazon was forced to temporarily suspend its grocery arm Pantry as it was managed by affiliates such as Cloudtail. The service is back with Amazon scaling up its business with the help of Amazon Retail India Pvt. Ltd.

Amazon Retail had received approval in July 2017 to invest $500 million to build a supply chain for food retail In India.

The company was earlier not sure if it can use its retail business or not, the person quoted earlier said. After going through the policy carefully, the online retailer decided to use the retail arm purely for the food business, the person said.

Pandey of Khaitan & Co. said Amazon was within its rights to sell through Pantry and as per the clarification issued by the Department of Industrial Policy & Promotion on Jan. 4. It read, “There is no change in the FDI policy on food product retail trading, which permits 100 percent FDI under approval route, including through e-commerce, in respect of food products manufactured and/or produced in India.”